Title Insurance

How Title Insurance Works

Unlike other forms of insurance that protect against future events, title insurance covers losses arising from issues that already exist at the time of purchase but were not discovered during the title search. A title company examines public records, including deeds, court records, tax records, and lien filings, to identify potential defects before issuing a policy. The insurance covers losses from defects that the search missed.

Title insurance is purchased with a one-time premium paid at closing rather than through recurring payments. The policy remains in effect for as long as the insured party (or their heirs) holds an interest in the property.

Lender's Policy vs. Owner's Policy

The lender's policy (also called a loan policy) protects the mortgage lender's interest up to the outstanding loan balance. This policy is required by virtually all mortgage lenders and the premium is part of closing costs.

The owner's policy protects the buyer's equity in the property up to the purchase price. While not required, an owner's policy is the buyer's only protection against title defects discovered after closing. In many states, a simultaneous issue discount reduces the owner's policy premium when purchased at the same time as the lender's policy.

Costs and Regulation

Title insurance premiums vary significantly by state. Some states regulate rates through filed rate schedules, while others allow competitive pricing. Total title insurance costs, including both policies and related title fees, typically range from depending on the property value and location. Under RESPA, borrowers have the right to shop for title insurance providers in most circumstances, and the lender must identify which title services are shoppable on the Loan Estimate.